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Yahoo meets Tumblr: The billion dollar platform

On May 20, Yahoo officially announced the acquisition of the massive blogging site Tumblr for $1.1 billion. The purchase is consistent with the new CEO’s string of tech-content acquisitions, and the benefits for Tumblr would be that it gets an experienced sales team, though with a user base hostile to advertising. PHD is always optimistic when scale (Tumblr) meets ad-savviness (Yahoo), but failures of previous Yahoo acquisitions (GeoCities, Delicious) have given PHD’s media professionals pause.

Tumblr is the Web’s biggest micro-blogging platform and social networking website, and it has had the rapid growth and tech pedigree Yahoo’s new CEO Marissa Mayer covets. April’s 117MM visitors (comScore) are doubly valuable due to their strong 18-34 demographic bent; Yahoo has recently admitted to be suffering from an aging user base. And Yahoo is eager to join its chief non-portal rivals (Google, Facebook) in having its own scaled social platform, with nearly limitless content to fuel its new “In-Stream” personalized experience.

However, Tumblr has had all kinds of problems driving revenue. Its young CEO has only grudgingly adopted ad solutions, and has done little to develop a brand-safe environment. Yahoo brings blue-chip advertisers and a talented tech team already knee-deep in new native ad solutions.

As opinioned by Time, whether or not the deal turns out to be a knockout (or at least get Yahoo back in the ring with the other heavyweights) will depend on the company’s ability to monetize those young users (without alienating them from the brand). Ultimately, Yahoo did the deal to get into social networking to create more advertising inventory and as promised by Yahoo’s CEO, “We promise not to screw it up.”

Today, PHD’s clients use Yahoo for the unparalleled reach of its home page and network. But a deeper partnership requires a true content relationship; one which produces a constant stream of quality content relevant to your brands audience. Tumblr could be that content machine. We’re cautiously optimistic that Yahoo’s acumen in meeting advertiser needs would help create ad solutions that are deep, engaging and well-lit. Marissa Mayer’s successful overhauls of Flickr and Weather suggest the new regime has learned from the old.